Archives for July 2013

July 2013 - Money Morning - Only the News You Can Profit From

The Next Fed Chief Will Be the Most Powerful of All Time

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The U.S. Congress established three core objectives for monetary policy in the Federal Reserve Act of 1913: maximum employment, stable prices, and moderate long-term interest rates.

But in addition to acting as steward of the economy, the Fed's role has expanded over the years.

The Great Recession, a need for corporate bailouts, and concerns over the Fed's secrecy brought about recent changes to its institutional identity.

Certainly we've had a renewed focus on the Fed's responsibility as a regulator.

People wanted to see – needed to see – a Fed that operates no longer as a creature of the banks, but as a watchdog instead.

Emblematically, the Dodd-Frank Wall Street Reform and Consumer Protection Act were signed into law in July 2010.

With it, Dodd-Frank brought the most substantial changes to financial regulation since the aftermath of the Great Depression. Particularly, a greater breadth of regulatory power was given to the Fed.

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How to Invest in Agriculture After the Potash Price Crash

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Global commodity woes increased again on Tuesday after Russia's Uralkali broke up one of the world's largest potash partnerships and ended a marketing venture agreement with producers in Belarus.

This development changes how to invest in agriculture- as it has already sent investors fleeing from nutrient and fertilizer stocks this week.

In addition, the impact will likely crash global potash prices by 25% to 30%, as the collapse of an international duopoly will end a price-fixing agreement that benefited other producers of the key commodity by artificially inflating prices and keeping supply off the market.

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The Best Sectors for Investing in Mexico, Plus a Few to Watch

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When many Americans think about Mexico, they consider widespread poverty, endemic corruption, undocumented immigration, and an ongoing domestic drug war that has claimed more than 100,000 lives. And, to a greater or lesser degree, that's true. On the very surface of things, it seems investing in Mexico is the last thing anyone would want to do.

But to consider only these blighted facts is to miss out on the whole picture – a picture that, overall, looks very promising. Americans should be investing in Mexico.

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U.S. Corporate Tax Rate Makes Ireland the M&A Hotspot

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No wonder U.S. President Barack Obama addressed the U.S. corporate tax rate in his "grand bargain" proposal Tuesday…

Avoidance or lowering of taxes has become a major consideration of corporate managements around the world. This is a result no doubt of the pursuit globally by governments of more and more money through taxes from both corporations and individuals.

The recent $8.6 billion deal in the pharmaceutical sector between Perrigo Company (NYSE: PRGO) and Ireland-based Elan Corp. PLC (NYSE ADR: ELN) could be the poster child for the effect of this trend – it drives corporate revenue out of the United States.

Exclusive: Obama Tells Money Morning Why He Just Loves Larry Summers...

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Says Obama:

Larry Summers for Fed Chief… He's got my vote. Absolutely!

Why? You just have to get to know the guy and you'll see he's perfectly qualified to head the Federal Reserve.

Here's just part of his resume.

From 1982-1983, Larry Summers was on staff at Ronald Reagan's Council of Economic Advisers. That's where Lawrence of Enablers earned his "Deregulate Everything" T-shirt.

After his brief stint on the Gipper's Council, where he was taught how real pros corral free markets for personal profit, the Enabler headed back to Harvard to teach kids (and himself) how to squeeze personal wealth out of mere economic theory.

He got his next shot at stardom as Chief Economist of the World Bank in 1991. He was there until 1993.

While there he wasted no time shining a light on himself.

In a 1991 interview he famously said:

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Buy, Sell or Hold: Foot Locker Races through the Mall

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I remember back to my childhood when I laced up my first brand new red-and-black Air Jordan basketball shoes and made believe I could do the amazing things Michael Jordan could do on the court.

This type of "make believe" and shoe purchase happened almost every summer – but to my dismay as my shoe size increased my basketball skills didn't. My overly generous parents indulged me in this expensive passion for the sake of fitness – and I know for certain that many parents are doing the exact same thing today.

The company where I bought my shoes so many years ago – Foot Locker, Inc. (NYSE: FL) – continues to provide the same high-quality footwear to the same type of customer, as well as a whole new crop of customers/athletes and is delivering fantastic earnings from it.

What to Expect from Q2 GDP

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Money Morning Chief Investment Strategist Keith Fitz-Gerald joined FOX Business' "Varney & Co" this morning to discuss his projections on the 2Q GDP, due out Wednesday a.m.

Will the stock market climb on the numbers? What's Bernanke's play?

Keith weighs in, and tells us that "good, bad, or ugly," we've got to participate in this market. He highlights that savvy investors should avoid making kneejerk decisions.

Watch the following interview to see how Keith surprises Stuart with his predictions on economic growth and how to play the market correctly right now:

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Vivendi-Activision Blizzard Corporate Breakup Games Value for Investors

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Last week, I wrote about how companies – and investors – can benefit from corporate breakups. I've never claimed to be clairvoyant, but in this case my timing was incidentally prophetic.

On Friday, a fantastic example of corporate breakup-for-value occurred when French conglomerate Vivendi SA (EPA:VIV) announced that it had sold its videogame giant Activision Blizzard (NASDAQ:ATVI) in an $8.17 billion deal.

Vivendi began as a simple water utility company back in the 1800s, but bloomed into one of the most diversified companies of all time. This multinational mass media and telecommunications company has owned everything from Chivas Regal whisky to African and Brazilian phone networks.

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How We Can Fix Education and the U.S. Economy, Too

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One of the biggest threats to the future of the U.S. economy is that more and more of the U.S. workforce lacks the skills needed to fill the jobs being created in the 21st century.

Last year, a survey by ManpowerGroup found that 49% of U.S. employers are struggling to fill essential jobs, because they can’t find workers with the proper skills.

Amazingly, there are 3.8 million job vacancies in the U.S. Yet the Bureau of Labor Statistics says there are 11.8 million Americans looking for work and the U.S. unemployment rate is an unacceptably high 7.6%.

The crisis is having an adverse effect on individuals, communities, and businesses as well as the U.S. economy as a whole.

That’s why improving education is one of the themes President Barack Obama is focusing on in his series of speeches on the U.S. economy this summer.

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Why Doesn't Jack Lew Support the New Glass-Steagall Act?

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You'd think that in the wake of the Great Collapse of 2008, reviving the Glass-Steagall Act would be a no-brainer.

As it happens, there are quite a few powerful members of government who oppose it, including Treasury Secretary Jack Lew, who seems to be pushing Dodd-Frank and the Volcker Rule a little too hard as the only regulation that's needed to keep the banks from making bad bets in toxic derivatives again.

But a little history lesson will show why his plan won't work.

In the wake of the Great Collapse of 2008, it was clear that we needed legislation that tightly regulates the big banks and their investments while encouraging economic growth.

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